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Flood Insurance

Flood Insurance Policies

Flood insurance is an insurance policy that covers property losses incurred from a flood situation. The National Flood Insurance Program (NFIP) has defined flooding as a temporary and general condition where a portion or complete area of at least two acres of normally dry land, or at least two properties, has been inundated with an overflow of inland waters, mudflows, or a rapid and unusual accumulation or runoff of surface waters from any source.

This type of insurance is applicable for any homeowner who may be at risk from potential flooding situations, including those at risk from hurricanes, landslides and other natural disasters. The NFIP offers two types of insurance coverage, one which covers building property up to a specific value, and the other which covers personal property up to a specified value. It is normally recommended that those at risk purchase both types of this insurance, and some mortgage companies might require that homeowners purchase a specified amount of coverage.

The insurance works by paying for direct physical damage to insured property as a result of flooding, up to the lesser of the replacement cost of the damage/actual cash value or the policy limit of liability. The replacement cost value refers to the cost to replace a specific damaged portion of a building, without depreciation. However, the actual cash value refers to the replacement cost value at the time of the loss minus the value of the physical depreciation.

This type of insurance is extremely beneficial for protecting homeowners from financial losses incurred from flooding events. It is important for consumers to note that only physical damage to their building or personal property that has been caused directly by the flood is covered by the policy. The building property or personal property flood coverage does not insure losses such as living expenses from temporary housing, financial losses caused by business interruption, self-propelled vehicles, currency and property located outside of the building.